Forex traders utilize fundamental analysis to make better decisions when trading. An extremely valuable tool that forex traders use consistently to better their positions within the trading world is reviewing economic indicators and announcements. The forex trader can utilize a financial calendar to keep track of these indicators and when they are to take place. Presently, there are numerous economic indicators which the forex trader should keep a close eye on to help them better position themselves in a tough trading market. These calendars will provide you with the data point you use to better determine the future direction of the forex market.
Again, there are numerous economic indicators which the forex trader can take advantage of to better position themselves within the markets. Some of these economic indicators consist of The Consumer Price Index (CPI), Producer Price Index (PPI), Purchasing Managers Index (PMI), Non-Farm Payroll, Industrial Production Index (IPI), Retail Sales Report, Gross Domestic Product (GDP) etc.
The Consumer Price Index can be considered one of the most important economic indicators looked at/reviewed by forex traders. The Consumer Price Index is the benchmark for inflation for the United States economy. The Consumer Price Index ascertains the change in the price of a basket of goods and services. Examples of items within the Consumer Price Index would be Other Goods and Services (tobacco, haircuts etc.), Medical Care (medical supplies, doctor’s services etc.), Housing (fuel oil, bedroom furniture etc.) & Food and Beverages (wine, milk, breakfast cereal etc.).
The Producer Price Index or PPI is an additional indicator that measures inflation within the United States. In a nutshell The Producer Price Index is a gauge of wholesale prices at producer level. Items included in the PPI would be items such as consumer goods and capital equipment. The major difference between the PPI and CPI is that the PPI does not include services within its calculation. In addition, the Producer Price Index is reported each month.
The Purchasing Managers Index is another regularly utilized economic indicator used by forex traders. The PMI gauges and is a barometer of business activity within the United States. The market indicator reviews both the manufacturing as well as the services sectors. The Purchasing Managers Index is a survey which queries those respondents about their perception of business variables and if they believe the variables will change from the previous month.
The Non-Farm Payrolls is a key indicator which captures the payroll data for a majority of the United States. The Non-Farm Payrolls does not include non-profit employees, workers within private households, government employees and farm employees. This indicator is also released on a monthly basis and is also a strong indicator of the health of the United States Economy.
Similar to the Consumer Price Index, the Gross Domestic Product is the most important of the economic indicators tracked by forex traders. The Gross Domestic Product includes the total dollar value of goods as well as services produced over a finite time frame. The Gross Domestic Product represents everything produced by individuals and businesses along with salaries of workers. The GDP is scheduled and broadcasted each business quarter by the Department of Commerce.
In closing, fundamental analysis should be utilized by every forex trader and have economic indicators scheduled like clockwork on their financial calendars. Fundamental analysis can help traders make better decisions when it comes to making financial decisions related to forex trades. Fundamental analysis incorporates new information to determine the future direction of a currency pair and provides you with the tool you might need to trade the forex market.